Sweet deals for retirees hard to figure
'Inadequate' SEC disclosure, complex arrangements obscure total numbers

By David Milstead, Rocky Mountain News
Saturday, May 7, 2005

Top executives spend their working lives getting rich. Then they retire and get richer.

While shareholders can find most executive pay in the annual proxy statement in a table that details compensation, less clear are the arrangements that provide payments to executives after they leave the company.
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"The SEC's disclosure proposals on compensation are extraordinarily inadequate," said Arthur Levitt, who should know - he was chairman of the Securities and Exchange Commission until 2001.  Levitt's comments came in a recent conference call. 

Many executives are covered by supplemental pension plans that pay hundreds of thousands of dollars - if not more than a million - each year in retirement.  Often, the executives' survivors qualify for some or all of the benefits.

Shareholders often must navigate a table that shows years of service and income levels, then wonder how much of a CEO's pay gets factored into the formula.

Executives also are eligible for "deferred compensation" accounts that allow them to stuff money into an account and let it grow until retirement.

Some plans, like one recently created at Janus Capital Group, require the executives pick Janus mutual funds as investment options - thereby aligning the pay with company performance.

Others, however, fix the payout at interest rates not available at the local bank.  Liberty Media inherited an employment agreement signed by Chairman John Malone when he ran cable giant TCI.  Malone gets 13 percent annual interest on the pay in his account;  the company owed him $12.8 million as of Dec. 31.

In total, Liberty has more than $35 million in liabilities payable to Malone if his employment is terminated.  Of that, $22.1 million has accumulated in another retirement plan that's racking up interest at 12 percent annually.

First Data suspended its pension plan for all employees in 1997.  But it makes generous payments for CEO Charlie Fote and all other longtime employees who participate in the company's defined contribution plan.

Like many 401(k) plans, First Data gives a match for contributions up to 3 percent.  Fote, like all other 10-year veterans of the company, gets another 3 percent contribution.  And like all First Data employees who were part of the pension before it was frozen, Fote gets another 3.4 percent of pay.  That's a total contribution of 9.4 percent of compensation.

What makes it particularly generous for Fote is that he's the company's highest-paid employee.  Fote's 2004 salary was $1,083,333, and he made a $1.1 million bonus.  He's also a participant in a long-term incentive pay plan that yielded $2.75 million in 2004.

All of it is "covered compensation" under First Data's savings plan.  So when it came time for the company to make its contribution to Fote's account, it deposited $430,844, according to a footnote in the company proxy.

At Qwest, CEO Dick Notebaert and CFO Oren Shaffer participate in the Qwest executive pension plan.  Right now, the company estimates that would be worth $1.85 million to Notebaert and $497,000 to Shaffer if they retired at age 65.

But Qwest has a bonus for the two men, veterans of Chicago telco Ameritech before it was sold to SBC Communications under their leadership.

Qwest will take the SBC pension plan and add up the benefits Notebaert and Shaffer would have received had their Qwest service actually been with SBC instead.  Then they'll figure out the boosted SBC pension and pay the extra benefit on top of what they already get from both the SBC and Qwest plans.

That benefit, Qwest estimates, is worth $15.1 million to Notebaert and $3.06 million to Shaffer